THERE IS NO SIGNAL - IT IS ALL NOISE!

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newscalper
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Postby newscalper » Tue Feb 19, 2013 6:16 pm

If you take a moment to think about it ...imo this is about THE most honest and possibly best video on trading I've ever seen.

All predictive models will fail, you cannot predict noise.
As humans we see (or think we see patterns), we will even see those patterns in randomly generated data. Maybe those patterns do not exist?

Mark Douglas says somewhere in one of his books that we do not need to be able to predict, and paraphrasing, that even if we have an edge, the distribution of results will be random too (running any casino sim will show you this).

What does this leave us with?

We can control our position size, we can control the size of our losses. The rest is just 'luck'.

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TygerKrane
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Postby TygerKrane » Tue Feb 19, 2013 7:37 pm

Don't Black Box trade algorithms / High Frequency Trading setups predict noise?

Love Mark Douglas, he's saved my ass quite a bit of stress.

newscalper, your post intrigues me particularly because at the moment, a friend is asking me to consider investing in his groups' PAMM, which they have running off of a 'bot'.

note: I'm not trying to discredit your statement, in fact, hyper-complex trading theories make me sick (i.e. any talk of neural network/genetic optimization, chaos theory, etc.)

I found Triangular Arbitration an interesting idea though, using a computer to scrape pips off the spread as the value jiggles around... :oops:

**Krane catches Tyger** !>I'm here to chew bubble gum and make major pips...and I'm all out of bubble gum.<!

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newscalper
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Postby newscalper » Tue Feb 19, 2013 8:46 pm

HFT works on information retail traders will never have - what they're effectively doing is front running orders aren't they? Result is that everyone else gets a worse price even if it's only a fraction of a pip that makes a huge difference. They certainly aren't doing it based on charts and patterns I know that.

LegendofZline
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Postby LegendofZline » Tue Feb 19, 2013 10:20 pm

Just mark a line anywhere. When price hits that line and doesn't close beyond enter. Once in the trade If it closes above line close the trade...

To me that makes perfect sense...


Well first of is this answer even right?


But how would tp be determined... 1:3 off stoploss?

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newscalper
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Postby newscalper » Wed Feb 20, 2013 8:31 am

Define 'close'

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Postby dchappy » Wed Feb 20, 2013 3:17 pm

Hi New : I get what Tro is saying , and some of your thoughts as well .

I maintain that the market consists completely of patterns and

and therefore it is very predictable .I won't go into Elliotwave/Chaos

theory here , but , think of a simple range breakout . There is a 100%

certainty that price will eventually move out of the range and that is

something that can be anticipated (predicted ) . If it did not break

the market would eventually cease to exist .

Why does the market move in these patterns ?


I believe it is because the market is made of the decisions of mine ,

yours and thousands of other traders placing orders .

And since we are all human , all of our decisions are forming a

repeatable pattern . Maybe if Dogs could trade , thier price patterns

would be completely different , but still predictable .

In a sense ..We are the noise . If we can follow the patterns

we can shake the money tree ......

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dojirock
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Postby dojirock » Wed Feb 20, 2013 5:18 pm

Spot on DC....

I agree with you. There is also tremendous value to ranges. One just needs to define what a range is and statistically they can profit from it.
"A small loss is just as satisfying as a large gain" -MO
"Sometimes we need to stop learning and start thinking...."
"Once you stack, you'll never go back!"

aliassmith
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Postby aliassmith » Wed Feb 20, 2013 5:24 pm

dchappy wrote:Hi New : I get what Tro is saying , and some of your thoughts as well .

I maintain that the market consists completely of patterns and

and therefore it is very predictable .I won't go into Elliotwave/Chaos

theory here , but , think of a simple range breakout . There is a 100%

certainty that price will eventually move out of the range and that is

something that can be anticipated (predicted ) . If it did not break

the market would eventually cease to exist .

Why does the market move in these patterns ?


I believe it is because the market is made of the decisions of mine ,

yours and thousands of other traders placing orders .

And since we are all human , all of our decisions are forming a

repeatable pattern . Maybe if Dogs could trade , thier price patterns

would be completely different , but still predictable .

In a sense ..We are the noise . If we can follow the patterns

we can shake the money tree ......


We play this game against other people and their combined behavior creates the patterns. One man's noise is another mans pattern.
Trade Your Way as Long as It Makes Money!

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Postby LegendofZline » Wed Feb 20, 2013 8:19 pm

newscalper wrote:Define 'close'


Say my horizontal i chose was open of previous 1hr.
Once price hits this and wicks into it I would enter if price closes below my line i drawn.

I watch and keep trade open til it hits my target or.
if I watch price and any 1hr candle closes above the open of the 1hr I mark i would get out the trade.

Just my thoughts maybe im off. Maybe its not translating right through the forum.

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newscalper
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Postby newscalper » Wed Feb 20, 2013 10:28 pm

You're right, it doesn't translate :)

Price does not close, ever. 'Close' is defined by an arbitrary time bar that you are putting significance on because it's what you've been given to work with by your broker. If your broker supplied you with 92.5 minute bar charts you'd be putting significance on that. The bar is not price.

Any line you draw from any point of any arbitrary time bar is just a random price and, being random has virtually no significance other than that you choose to put upon it.

You can't even say the daily open has significance. Which daily open? The one on your chart? The one somewhere between Frankfurt and London? (what time did they get in this morning?) etc.

That's why I said define close - what is close? 1 tick, a 15 minute bar, an hourly bar, a daily bar etc etc. The only things that aren't random are fixed price points.

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